Unified goal planning or how to invest less and achieve your financial goals?

How to invest less and achieve your financial goals?

As we have discussed before goal-based investing makes it more likely for you to reach your financial goals. Writing and tracking financial goals actually fuels the commitment required to achieve them.

In this post, we discuss how unified goal planning helps you achieve your goals by investing less today. Unified goal planning takes all your financial goals and calculates one SIP amount you need to invest by optimizing across all goals. The combined SIP in a unified goal approach is less than the sum of the individual SIP required to achieve the goals separately.

To reiterate, a financial goal has three components –
  • Purpose eg daughter’s college education
  • Amount eg Rs30 lakhs
  • Time eg in 12 years

As a first step, it helps to list out all your goals.

Let’s look at an example

A 27 years old with a current monthly expense of Rs 45k is planning for the following goals:

  1. New Car in 5 years (~16 lakh corpus)
  2. Daughter’s college in 14 years (~25 lakh corpus)
  3. Son’s college in 17 years (~29.5 lakh corpus)
  4. Retirement in 33 years (retirement corpus of ~2.7 Crores to maintain his current lifestyle)

Your set of goals will be specific to you, so treat the above as an illustration. Part of a good goal planning system is to calculate how much you need to invest today. These calculators, popularly called SIP calculators, tell you the amount needed to be invested each month to achieve your financial goals.

Here is what our goal calculators show as SIP for the above goals –

Financial Goal Corpus In Years Monthly SIP
Car 15.8 Lakhs 5 20,000
Daughter’s Education 25.3 Lakhs 14 6,200
Son’s Education 29.5 Lakhs 17 4,800
Retirement 2.7 Cr 33 5,800

So if you plan for all the goals separately, you need to start investing Rs36,800 today.

If you used a unified goal planning approach, the SIP required would be much lower.  Rs 26,600 per month in this case. With a unified portfolio approach, you start with a SIP amount that is 28% lower and still have the same set of goals.

How does this really work?

Let’s simplify and see the math behind this. Say, you have two goals –

Goal1 – requires a SIP of 5k for 5 years
Goal2 – requires a SIP of 10k for 10 years

A simple advice would be investing Rs15k for 5 years and then Rs10k from year 5 to 10.

Notice this –

  • Your SIP amount is not constant for 10 years
  • You are being asked to invest more now and less later. Your income, on the other hand, is likely to increase over time. Regardless if you can invest Rs15k today you can invest Rs15k five years from now, so you shouldn’t be asked to decrease your SIP amount.

In unified goal planning, we say how can we better this? Using a unified goal planner we calculate that you can invest Rs12k every month for 10 years to achieve both the goals. So start smaller today and never change your SIP amount. Isn’t that more intuitive?

This article was initially published by CNBCTV18 in the Personal Finance section.

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9 Responses

  • Balaji

    September 25, 2019 AT 10:09

    Unified goal approach is very helpful and let’s us to plan with a fixed amount to start with and increase progressively as the goals gets added.
    One suggestion would be to display how much is allotted for each goal would be very helpful. Like in the example out of 12k, 5k goes to goal 1 and 7k goes to goal 2. In that way, I can decide how much I should allocate to a goal on an investment. Say I invest 12k in a SIP, I will tag 35% to goal 1 and remaining to goal 2. Otherwise consider with multiple goals, I can know only how much to invest but not sure how much to allocate for each goal and eventually I might not have the visibility of how much am achieving on the goal.

    • Gaurav Rastogi

      September 28, 2019 AT 02:51

      Thanks, Balaji, your feedback is well taken.

  • Vikash Upadhyay

    October 6, 2019 AT 09:29

    Sir, I’m a student and I want to deposit my savings approx 500-1000 per month regularly for long term!! Please suggest me where should I invest??? Mutual fund or sip! Which is beneficial for long term!???
    Please give your suggestions!!

    • Gaurav Rastogi

      October 7, 2019 AT 02:23

      The best way to start would be to sign up on Kuvera and setup a retirement goal https://kuvera.in/goals/retirement . We will advise on the funds and you can start investing in those.

    • Avishek sen

      March 14, 2022 AT 15:37

      U can invest it in index fund.

  • Bharat

    February 5, 2020 AT 04:48

    sir I am 36 year old I have goal for my son education after 9 year and daughter after 12 year and after my daughter marriage after 20 year and my retirement after 24 year how I chose mutual fund who give good return for long term I can take moderate risk .plz suggest

    • Gaurav Rastogi

      February 6, 2020 AT 01:02

      Pls create an account with Kuvera and do your goal planning. We will advise on a portfolio based on that.

  • Afzal

    September 20, 2020 AT 09:52

    Good one

  • Dinesh Sood

    October 8, 2020 AT 08:20

    Hi, i m 40yrs old and i want to invest 2k monthly but don’t know in which mf should I invest i want buy car about you 10 lacs in next 5Years. Plz suggest which fund i have kuvera account already.